Posted by Tim Jensen on July 05, 2002 at 19:10:04:
Phil,
They have owned it for 30 years. they just got the money for repairs. The property is worth retail about 40k.
Tim
Interesting deal - Posted by Tim Jensen
Posted by Tim Jensen on July 05, 2002 at 18:16:37:
Hi all,
I came accross this deal and would like a little input. I have a 3 bedroom 1 bath house. The owners have a $30,000 4 year mortgage with payments of $740 a month. I know I can rent it for $625-$650 a month and I can take the negative cashflow, about $200 a month. They are 9 months into the mortgage.
They will sell it subject-to. Cashflow is negative, but in a little over 3 years I’ll have a place free and clear. Would you buy it subject-to. The place doesn’t need a thing done, new siding, roof, furnace and the such. Looking for input. I don’t want to pay off the mortgage and get a new one, either.
Thanks,
Tim
More details - Posted by Tim Jensen
Posted by Tim Jensen on July 06, 2002 at 08:10:15:
Thanks for the input all.
Ron asked if there was any defferrred maintenance and there is not. It looks like these people spent a great deal on the house with new siding, roof, kitchen and the such. I am going to call the woman back today and get her and her husband to sign today.
I happen to agree that buying it was a good deal, just thought I’d throw it out. I got the exact numbers and have figured out that the total negative cashflow would be $172.00 a month and I would pay that for 40 months. Its in a good working poor area, where people want to live and there are homeowners mixed with some rentals. I ran an amorization schedule and figured that if I get sick of the negative cashflow after a year the balance on the mortgage will be 15k and I could easily refi.
I think that this is a good deal for a seasoned investor, however a newbie would want to stay away from this aligator. Buying this property does break my rule of noy buying negative cashflow, but after the 40 months its nothing but net.
tim
Tim
Re: Interesting deal - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on July 05, 2002 at 21:55:47:
Tim Jensen----------------------
If everything is as you say, I join in the chorus of “yes, buy it.”
Be careful there is no deferred maintenance that you will be stuck with.
I’d check to see if there is a prepayment penalty on the property. If there is none, you could probably refinance the property pretty soon with a somewhat longer-term mortgage, gaining positive cash flow, while losing the soon to be free and clear aspect of the property.
If you really got into a cashflow bind, you might be able to make a deal with some person with extra cash earning them a piddling amount in the bank. “You pay me $200 a month for X months (until mortgage is paid off), and I will pay you $250 a month for the next X months after that.” Or some similar set of numbers that would yield the investor about 12% a year return on the investment.
Gee, I just came up with that idea, and it sounds like a good marketing tool when talking to potential investors. We can figure out the exact interest rate we are paying, and it probably sounds good to the investor. I’ll bet JohnBoy or or GL (ON) or somebody could whip out the return on this series pronto. Figure x is about 30 months or 36 months.
Oh, and did I detect that this is a no money down deal? You just take over the payments, without putting any money in upfront?
Hmm, I wonder if they didn’t use the money for something other than fixing up the property? I’ll bet they spent a lot of that loan for their own personal expenses.
Good InvestingRon Starr******
Re: Interesting deal - Posted by JohnBoy
Posted by JohnBoy on July 05, 2002 at 21:37:59:
Looks like a no brainer to me! For about $7800 over 3 years and 3 months you will own a $40k property free and clear! Better jump on this fast! You can’t steel in slow motion!
Re: Interesting deal - Posted by GL(ON)
Posted by GL(ON) on July 05, 2002 at 21:24:53:
And the interest rate is about 8% right?
If you can handle the negative cash flow without getting fed up, and if the property is worth owning long term then I say go for it.
Re: Interesting deal - Posted by Verve
Posted by Verve on July 05, 2002 at 20:36:01:
Tim,
So you’re saying the home is gonna cost you $3600.00 after renting it for 3 years after which it’ll be free and clear?
I’d jump on that with no hesitation. In 3 1/2 - 3 3/4 years you’ll be back to even and then you can look forward to that positive cash flow every month for the rest of your life. What is that - about $6000.00 a year more or less positive?
Sounds like a deal to me. What is the sellers phone number? :o)
Re: Interesting deal - Posted by phil fernandez
Posted by phil fernandez on July 05, 2002 at 18:47:18:
Tim,
A 4 year mortgage. Now that’s a new one for me. Why would someone sign up for a 4 year, I assume fully amortized mortgage.
Couple of questions : 1./ What’s the property worth today. 2./ Why are they selling ?
If they bought it 9 months ago, is it worth any more than what they bought it for ?
I’ll wait fo your answers before I bite on the deal.
A Definite Go - Posted by phil fernandez
Posted by phil fernandez on July 06, 2002 at 09:36:11:
Tim,
I’d do your deal all day long. You’re basically buying the house at a discount with nothing down and a monthly payment of $172 for a few short years till the existing mortgage is paid off and you have a free and clear little money machine.